The killing of al-Shihri and other AQAP leaders "is leading to the gradual dismantlement of the group," CNN national security analyst Peter Bergen said.

White House counterterrorism adviser John Brennan in April described AQAP as "very, very dangerous" and "the most active operational franchise" of al Qaeda.

FBI Director Robert Mueller told Congress in May that al Qaeda and its affiliates, "especially al Qaeda in the Arabian Peninsula, currently represent the top counterterrorism threat to the nation."

The group was behind the so-called underwear bomb attempt on a U.S.-bound international flight on Christmas Day 2009 and an effort to smuggle bombs in printer cartridges onto U.S.-bound cargo planes in 2010.

Al-Shihri, who was once held by the United States at Guantanamo Bay in Cuba, was killed Monday in an operation in Hadramawt Valley, state-run news agency SABA reported.

Six other terrorists were killed as well, the military said in its statement, posted on an official website.

One security official said that a brother of senior AQAP leader Nadir al-Shadadi was among those killed.

While the Yemeni military said al-Shihri was killed in "an operation by the armed forces," three local security officials told CNN that a U.S. drone conducted the strike.

The United States generally does not comment on reported drone strikes.

"For weeks we have known his destination and were waiting for the right time to conduct this major operation. The attack makes al Qaeda a handicapped network," a senior Defense Ministry official told CNN on condition of anonymity because he is not authorized to talk to media.

In November 2007, al-Shihri, a Saudi national, was transferred from Guantanamo Bay to Saudi custody to undergo a program designed to lead people away from terrorism.

Despite travel restrictions requiring him to stay in Saudi Arabia, he left for Yemen, where he joined another former Guantanamo detainee to assume leadership of AQAP, the U.S. House Armed Services Committee said in a document about detainees who resume terrorism.

The U.S. State Department notes that he was publicly identified in January 2009 as the deputy leader of AQAP.

"As deputy of AQAP, al-Shihri helps carry out terrorist acts by generating targets, recruiting new members, assisting with training and attack planning, and tasking others in the preparation of attacks," the State Department said.

He is believed to have played a key operational role within AQAP, including the planning of attacks inside Yemen and a failed attack to the kill the head of Saudi counterterrorism in 2009, Cruickshank said.

Al-Shihri "was the most important Saudi figure within the group. He was key to AQAP's recruitment of Saudis and their fund-raising in the kingdom," Cruickshank said.

In December 2009, Yemen said it thought al-Shihri was at the site of an aerial assault against senior al Qaeda operatives. But later reports said he had apparently escaped the attack.

Residents in the Hadramawt Valley said that Yemeni Air Force planes and U.S. drones have been roaming the skies for four days.

On Sunday, Yemeni President Abdu Rabu Mansour Hadi said Yemeni authorities had uncovered three al Qaeda plots to attack populous areas in the provinces of Sana'a, Aden and Hadramawt.

Meanwhile, clashes intensified Monday between al Qaeda and the pro-government Popular Resistance Committees in the town of Shaqra, the third day of fighting.

Three al Qaeda militants were killed in the clashes, two local security officials said.

"Al Qaeda is attempting to retake the areas it lost in May. It is sending its fighters back to Abyan," one of the security officials told CNN on condition of anonymity because of sensitivity of the issue.

After the Yemeni government announced victory against AQAP in the towns of Jaar, Zinjibar and Shaqra in late May, the terrorist group carried out numerous suicide bombings in various provinces, killing hundreds of troops.

One of the bombings killed the commander of Yemen's southern military region, Salem Qatan, the highest-ranking military official killed in Yemen's fight against terrorism.